DLH Holdings Corp.
For the period ended Mar 31, 2026. Filed May 6, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2026 · Filed May 6, 2026
DLHC$3.61-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-12-31; filed 2026-02-09.
0000785557-26-000013
ITEM 2. : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-06.
0001628280-26-031322
ITEM 2. : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 100 previous paragraphs and 112 current paragraphs.
58 unchanged; 36 reworded; 12 added; 5 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 6 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Although broader funding disruptions were partially addressed in early February 2026, funding for the Department of Homeland Security has remained subject to continued uncertainty, and full-year appropriations for the Department have not yet been enacted, resulting in ongoing funding instability for that department. With minimal revenue generated from that department, we do not expect a significant impact from this budgetary instability.
Current report
In April 2026, the Administration released its proposed fiscal year 2027 budget, reflecting a continued emphasis on higher defense spending relative to previous levels. These increases in defense and national security funding are partially offset by reductions in certain civilian agency spending. While the Administration's budget provides insight into their policy initiatives and spending priorities, the federal budget is subject to Congressional appropriations authority.
Current report
Revenue
Current report
Cost of Operations
Current report
For the six months ended March 31, 2026, depreciation and amortization expense were approximately $0.4 million and $8.2 million, respectively, as compared to approximately $0.3 million and $8.2 million for the six months ended March 31, 2025, respectively.
Current report
Interest Expense, net
Current report
Provision for Income Taxes (Benefit)
Current report
Provision for income taxes decreased $2.0 million for the six months ended March 31, 2026 over 2025. The effective tax rate for the six months ended March 31, 2026 and 2025 was 25.2% and 27.4%, respectively.
Current report
“Adjusted Income from Operations” represents income from operations before the costs associated with scaling general and administrative costs to revenue volume, referred to below as “Cost scaling initiatives”.
Current report
(1) Cost scaling initiatives consist of expenses incurred by the Company in scaling its business to align with its current contract volume resulting from the previously disclosed conversion of programs for which the Company previously served as prime contractor to small business contractors.
Current report
Cash flows provided by (used in) operating activities totaled approximately $(1.0) million and $3.0 million for the six months ended March 31, 2026 and 2025, respectively. The decrease in cash provided by operating activities is primarily due to a decrease in revenue volume as compared to the prior year.
Current report
On January 31, 2023, we executed a floating-to-fixed interest rate swap with FNB which had a notional amount of $74.0 million, and a fixed interest rate of 4.10%. The swap matured on January 31, 2026. As of March 31, 2026, no interest rate swaps were outstanding and all debt is subject to floating interest rates.
Removed paragraphs (5)
Previous report
As previously disclosed, the VA issued solicitations for performance of the CMOP program under separate contracts for each of its eight locations, with the awards limited to service-disabled veteran owned small business (“SDVOSB”) prime contractors. As this ongoing acquisition evaluation is occurring, DLH was awarded a new sole-source Indefinite Quantity/Indefinite Delivery ("IDIQ") contract effective October 28, 2025. The IDIQ has ceiling value of $90.0 million, and a maximum ordering period through October 2026, with the potential for orders placed within that period to extend performance through April 2027. Depending on the timing of the acquisition process, revenue recognized under the IDIQ may be less than the awarded value.
Previous report
During the quarter, we performed services at four CMOP locations. The VA made an award for one location, which transitioned to a new prime contractor on November 28, 2025. For the remaining three locations, the VA made two awards for additional locations, but that transition timing has not yet been established. Until the VA has completed its procurement and transition processes, we expect to continue providing pharmacy and logistics services at these locations. DLH intends to provide additional updates to the progression of these solicitations as a part of its regular quarterly and annual filings.
Previous report
The Federal government has an overall goal of 23% of prime contracts flowing through small businesses. As previously reported, various agencies within the federal government have policies that support small business goals, including the adoption of the “Rule of Two” by the VA, which provides that the agency shall award contracts by restricting competition for the contract to service-disabled or other veteran-owned businesses. To restrict competition pursuant to this rule, the contracting officer must reasonably expect that at least two of these businesses, which are capable of delivering the services, will submit offers and that the award can be made at a fair and reasonable price that offers best value to the U.S. When two qualifying small businesses cannot be identified, the VA may proceed to award contracts following a full and open bid process.
Previous report
Cash flows used in operating activities totaled approximately $(4.8) million and $(11.5) million for the three months ended December 31, 2025 and 2024, respectively. The increase in cash from operations was principally due to an increase in collections over the prior year period, which resulted in a reduction in our accounts receivable.
Previous report
On January 31, 2023, we executed a floating-to-fixed interest rate swap with FNB which has a notional amount of$74.0 million at December 31, 2025, a fixed interest rate of 4.10% and a maturity date of January 31, 2026. As a result of entering these agreements, for the three months ended December 31, 2025, interest expense has been increased by approximately $0.0 million.
Reworded paragraphs (36)
Previous wording
You should read the following discussion in conjunction with the Consolidated Financial Statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended September 30, 2025, and in other reports we have subsequently filed with the SEC. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in this Management’s Discussion and Analysis are forward-looking statements that involve risks and uncertainties. Any statements that refer to expectations, projections or other characterizations of future events or circumstances or that are not statements of historical fact (including without limitation statements to the effect that the Company or its management “believes”, “expects”, “anticipates”, “plans”, “intends” and similar expressions) should be considered forward-looking statements that involve risks and uncertainties which could cause actual events or DLH’s actual results to differ materially from those indicated by the forward-looking statements. Forward-looking statements in this report include, among others, statements regarding benefits of acquisitions, estimates of future revenues, operating income, earnings, earnings per share, backlog, and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this report due to a variety of factors, including: the failure to achieve the anticipated benefits of any future acquisition (including anticipated future financial operating performance and results); the diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations; the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our debt obligations; compliance with bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; significant delays or reductions in appropriations for our programs and broader changes in U.S. government funding and spending patterns; legislation that amends or changes discretionary spending levels or budget priorities; legal, regulatory, and political changes from the federal government that could result in economic uncertainty; the impact of inflation and higher interest rates; and other risks described in our SEC filings. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking sta…
Excerpt shortened here; the source contains the full paragraph.
Current wording
You should read the following discussion in conjunction with the Consolidated Financial Statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended September 30, 2025, and in other reports we have subsequently filed with the SEC. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in this Management’s Discussion and Analysis are forward-looking statements that involve risks and uncertainties. Any statements that refer to expectations, projections or other characterizations of future events or circumstances or that are not statements of historical fact (including without limitation statements to the effect that the Company or its management “believes”, “expects”, “anticipates”, “plans”, “intends” and similar expressions) should be considered forward-looking statements that involve risks and uncertainties which could cause actual events or DLH’s actual results to differ materially from those indicated by the forward-looking statements. Forward-looking statements in this report include, among others, statements regarding benefits of acquisitions, estimates of future revenues, operating income, earnings, earnings per share, backlog, and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this report due to a variety of factors, including: the failure to achieve the anticipated benefits of any future acquisition (including anticipated future financial operating performance and results); the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our debt obligations; compliance with bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; significant delays or reductions in appropriations for our programs and broader changes in U.S. government funding and spending patterns; legislation that amends or changes discretionary spending levels or budget priorities; legal, regulatory, and political changes from the federal government that could result in economic uncertainty; the impact of inflation and higher interest rates; and other risks described in our SEC filings. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s periodic reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended Septem…
Excerpt shortened here; the source contains the full paragraph.
Previous wording
We have invested in leading credentials and capabilities that we expect will deliver value to our customers. These investments include the development of secure Information Technology ("IT") platforms; sophisticated data analytic tools and techniques;
Current wording
We have invested in leading credentials and capabilities that we expect will deliver value to our customers. These investments include the development of secure Information Technology ("IT") platforms; sophisticated data analytic tools and techniques; and implementation process improvement and quality assurance programs and techniques. We are actively pursuing additional credentials that will support our customers' ever evolving missions.
Previous wording
We deliver services primarily through prime contracts awarded by the federal government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the federal government, which supports our overall corporate growth strategy. Our revenue is distributed to time and materials contracts (44.4%), firm fixed price contracts (35.3%), and cost reimbursable contracts (20.3%).
Current wording
We deliver services primarily through prime contracts awarded by the federal government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the federal government, which supports our overall corporate growth strategy. Our revenue is distributed to time and materials contracts (40.6%), firm fixed price contracts (37.6%), and cost reimbursable contracts (21.8%).
Previous wording
IT modernization and cyber security maturity are priority initiatives throughout our customer set. Our customers, including numerous institutes and centers within the National Institutes of Health ("NIH"), the Defense Health Agency ("DHA"), Telemedicine and Advanced Technology Research Center ("TATRC"), and US Navy, rely on our information technology support to enable their vital missions. We work with these customers to reduce risk and build resilience to cyber and physical threats to the federal government’s infrastructure, providing the full spectrum of cyber capabilities, cryptographic and true cyber engineering, Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, services under Cybersecurity Maturity Model Certification ("CMMC") Level 2, and enterprise infrastructure and cloud governance focused on designing and implementing zero trust architecture.
Current wording
IT modernization and cyber security maturity are priority initiatives throughout our customer set. Our customers, including numerous institutes and centers within the National Institutes of Health ("NIH"), the Defense Health Agency ("DHA"), The U.S. Army Institute of Surgical Research ("USAISR"), and US Navy, rely on our information technology support to enable their vital missions. We work with these customers to reduce risk and build resilience to cyber and physical threats to the federal government’s infrastructure, providing the full spectrum of cyber capabilities, cryptographic and true cyber engineering,
Previous wording
Our employees support innovative, cutting-edge research on emerging trends, health informatics analyses, and the application of best practices including mobile, social, and interactive media. We leverage evidence-based methods and web technology to drive health equity to our most vulnerable populations through public engagement. Projects often involve highly specialized expertise and transformative R&D support services. Our decades of experience designing, conducting, and analyzing studies for our diverse customer base, and our full-service clinical research solutions are designed for each customer’s specific research development program. Our employees provide expert knowledge and experience that supports our customers’ missions.
Current wording
Our employees support innovative, cutting-edge research on emerging trends, health informatics analyses, and the application of best practices including mobile, social, and interactive media. We leverage evidence-based methods and web technology to drive health equity to our most vulnerable populations through public engagement. Projects often involve highly specialized expertise and transformative R&D support services. Our decades of experience designing, conducting, and analyzing studies for our diverse customer base, and our full-service clinical research solutions are designed for each customer’s specific research and development program. Our employees provide expert knowledge and experience that supports the missions of our customers' mission.
Previous wording
Our employees specialize in delivering engineering solutions that support our customers' evolving needs by rapidly deploying resources, solutions, and services. This includes specialized engineering expertise, encompassing areas of Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance, and Reconnaissance ("C5ISR"), modeling, simulation & training, performance based logistics, system modernization, technology-enabled health solutions and software engineering on behalf of the US Navy, HHS, VA, and other federal customers.
Current wording
Our employees specialize in delivering engineering solutions that support our customers' evolving needs by rapidly deploying resources, solutions, and services. This includes specialized engineering expertise, encompassing areas of Command, Control, Communications, Computers, Cyber-Defense, Combat Systems, and Intelligence, Surveillance, and Reconnaissance ("C6ISR"), modeling, simulation & training, performance based logistics, system modernization, technology-enabled health solutions and software engineering on behalf of the US Navy, HHS, VA, and other federal customers.
Previous wording
•CMOP pharmacy and logistic services represent approximately $26.9 million and $34.1 million of revenues for the quarter ended December 31, 2025 and 2024, respectively.
Current wording
•CMOP pharmacy and logistic services represent approximately $19.7 million and $28.7 million of revenues for the three months ended March 31, 2026 and 2025, respectively, and $46.6 million and $62.8 million of revenues for the six months ended March 31, 2026 and 2025, respectively.
Previous wording
During the quarter ended December 31, 2025, we generated revenues of approximately $26.9 million from our set of contracts in support of the VA's CMOP program. As previously reported, the VA has been soliciting proposals for new contracts covering this work with a requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. To date, the VA has awarded and completed the transition process for five locations to new SDVOSB prime contractors; the remaining three locations continue to be operated by DLH as the prime contractor. Should awards for the locations for which we have submitted a proposal be offered to a partner of DLH, we expect to continue to perform a significant amount of those contracts' volume of business as a subcontractor.
Current wording
As previously reported, the VA has been soliciting proposals for new contracts covering this work with a requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. At the start of the second quarter, DLH performed services at three CMOP locations. During the quarter, one site transitioned to a SDVOSB prime contractor at the end of February 2026. Regarding the remaining two locations, one transitioned at the end of April and the other is expected to transition at the end of May 2026.
Previous wording
At December 31, 2025, our backlog was approximately $517.4 million of which $124.0 million was funded backlog. At September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog.
Current wording
At March 31, 2026, our backlog was approximately $442.4 million of which $75.0 million was funded backlog. At September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog.
Previous wording
We define backlog as our estimate of remaining future revenue from existing signed contracts, assuming the exercise of all options relating to such contracts and including executed task orders issued under IDIQ contracts or if the contract is a single award IDIQ contract.
Current wording
We define backlog as our estimate of remaining future revenue from existing signed contracts, assuming the exercise of all options relating to such contracts. Included in backlog are executed standalone contracts, single award IDIQ contracts, and task orders procured under multi-award IDIQ contracts.
Previous wording
We define funded backlog as the portion of backlog for which funding is appropriated and allocated to the contract by the customer and authorized for payment by the customer, once specified work is completed. Funded backlog does not include the full contract value as Congress often appropriates funding for contracts on a yearly or quarterly basis.
Current wording
We define funded backlog as the portion of backlog for which funding is appropriated and allocated to the contract by the customer and authorized for payment by the customer, once specified work is completed. Funded backlog does not include the full contract value as customers often allocate funding for contracts on a yearly or quarterly basis.
Previous wording
The U.S. budget and regulatory landscape remains uncertain, and this uncertainty is expected to continue. The Company’s performance depends on overall federal spending levels and how well its capabilities align with government priorities. The administration is reviewing agency spending to improve efficiency and productivity, which has already led to some contract reductions, cancellations, and price renegotiations for the Company. Future reviews may cause further adjustments or mandates to cut costs.
Current wording
The U.S. budget and regulatory landscape remains uncertain, and this uncertainty is expected to continue. While full-year appropriations have been enacted for a significant portion of federal agencies, the Company’s performance continues to depend on overall federal spending levels and the extent to which its capabilities align with government priorities. The administration is reviewing agency spending to improve efficiency and productivity, which has resulted in contract reductions, cancellations, and price renegotiations for the Company. Ongoing and future reviews may lead to additional adjustments or cost reduction mandates.
Previous wording
On November 12, 2025, Congress passed and the President signed an appropriations bill to fund certain agencies and extend funding at current levels for the remaining agencies through January 30, 2026. As Congress did not enact full-year appropriations or a continuing resolution by the expiration of that funding measure, a partial government shutdown commenced on January 31, 2026. The partial shutdown ended on February 3, 2026 when Congress passed and the President signed funding appropriations for five federal agencies, including DoD and HHS. A short-term continuing resolution providing two weeks of funding for the Department of Homeland Security (DHS) was included in the appropriations. The Company does not expect this to have a material impact on its operations and financial performance.
Current wording
On November 12, 2025, Congress passed and the President signed an appropriations bill to fund certain agencies and extend funding at current levels for the remaining agencies through January 30, 2026. On February 3, 2026, Congress passed and the President signed appropriations for the remainder of the government fiscal year. These appropriations covered nearly all major departments and agencies, including the HHS, VA, and DoD.
Previous wording
The Company closely monitors federal budget, legislative, and contracting developments to adapt its strategies accordingly. While defense and national security spending enjoy bipartisan support amid global tensions, uncertainty persists around the timing and passage of annual appropriations bills.
Current wording
The Company closely monitors federal budget, legislative, and contracting developments to adapt its strategies accordingly. While defense and national security spending continue to receive bipartisan support amid ongoing global tensions, uncertainty remains regarding future budget priorities, funding levels, and the potential for further legislative or administrative actions affecting federal spending.
Previous wording
We continue to align the Company’s capabilities with well-funded budget priorities and take steps to maintain a competitive cost structure in line with our expectations of future business opportunities. In light of these actions, as well as the budgetary environment discussed above, we believe we are well positioned to continue to win new business in our addressable market.
Current wording
We continue to align the Company’s capabilities with well-funded budget priorities and maintain a competitive cost structure in line with expectations of future business opportunities. Based on these actions and the current budgetary environment, we believe the Company is well positioned to continue winning new business within its addressable market. The Company does not expect the funding disruptions described above to have a material impact on its operations or financial performance.
Previous wording
The effect of set-aside provisions may limit our ability to compete for prime contractor positions on programs that we recompete or that we have targeted for growth. In these cases, the Company may elect to join a team with an eligible contractor as prime for specific pursuits that align with our core markets and corporate growth strategy.
Current wording
The Federal government has an overall goal of 23% of prime contracts flowing through small businesses and various agencies within the federal government have policies that support small business goals. The effect of set-aside provisions may limit our ability to compete for prime contractor positions on programs that we recompete or that we have targeted for growth. In these cases, the Company may elect to join a team with an eligible contractor as prime for specific pursuits that align with our core markets and corporate growth strategy.
Previous wording
Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $17.4 million for the three months ended December 31, 2025 over 2024; the decrease was primarily due to the decrease in revenue volume.
Current wording
Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $24.1 million for the three months ended March 31, 2026 over 2025; the decrease was primarily due to the decrease in revenue volume.
Previous wording
General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $0.3 million for the three months ended December 31, 2025 as compared to 2024. As a percentage of revenue, general and administrative costs increased to 11.3% from 8.9%, with the increase being primarily due to the decrease in revenue volume. Subsequent to the end of the quarter, we reduced general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
Current wording
General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $0.7 million for the three months ended March 31, 2026 as compared to 2025. As a percentage of revenue, general and administrative costs increased to 12.7% from 9.2%, primarily due to the decrease in revenue volume. During the quarter, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
Previous wording
For the three months ended December 31, 2025, depreciation and amortization expense were approximately $0.2 million and $4.1 million, respectively, which was flat as compared with the three months ended December 31, 2024, respectively.
Current wording
For the three months ended March 31, 2026, depreciation and amortization expense were approximately $0.2 million and $4.1 million, respectively, as compared to approximately $0.2 million and $4.1 million for the three months ended March 31, 2025, respectively.
Previous wording
Provision for Income Taxes (Benefit) Expense
Current wording
Provision for Income Taxes (Benefit)
Previous wording
Provision for income taxes decreased $1.0 million for the three months ended December 31, 2025 over 2024. The effective tax rate for the three months ended December 31, 2025 and 2024 was 32.5% and 25.9%, respectively. The increase in the effective tax rate compared to the prior year period was primarily attributable to state income taxes and changes in permanent differences, partially offset by the impact of federal tax legislation enacted in July 2025. The One Big Beautiful Bill Act modified the limitation on the deductibility of business interest expense. The Company’s tax provision for the current quarter reflects these changes, including a more favorable limitation on business interest expense under Section 163(j). The Company’s effective tax rate differs from the federal statutory rate of 21.0% primarily due to state income taxes and permanent differences, partially offset by the effects of the legislative changes described above.
Current wording
Provision for income taxes decreased $1.0 million for the three months ended March 31, 2026 over 2025. The effective tax rate for the three months ended March 31, 2026 and 2025 was 20.6% and 29.1%, respectively. The decrease in the effective tax rate compared to the prior year period was primarily attributable to the Company’s pre-tax loss in the current period, which increased the relative impact of state income taxes and permanent differences. Permanent differences primarily consist of non-deductible expenses, including stock-based compensation, executive compensation limitations under Section 162(m), and other non-deductible items, which do not provide a corresponding tax benefit in a loss position. The Company’s effective tax rate differs from the federal statutory rate of 21.0% primarily due to state income taxes and permanent differences, partially offset by the impact of federal tax legislation enacted in July 2025.
Previous wording
Revenue decreased $21.9 million for the three months ended December 31, 2025 over 2024, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors.
Current wording
Revenue decreased $51.8 million for the six months ended March 31, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors.
Previous wording
The Company is presenting certain non-GAAP measures regarding its financial performance. The measures presented are Earnings Before Interest, Tax, Depreciation, and Amortization ("EBITDA") and Adjusted EBITDA. In calculating Adjusted EBITDA, we have added back to EBITDA certain costs associated with scaling indirect costs to revenue volume. These resulting measures present our financial performance compared to the results delivered in the prior year period.
Current wording
The Company is presenting certain non-GAAP measures regarding its financial performance. The measures presented are Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), Adjusted EBITDA, and Adjusted Income from Operations. Adjusted EBITDA is calculated by excluding from EBITDA certain costs associated with scaling indirect costs to revenue volume and Adjusted Income from Operations is calculated by excluding such costs associated with scaling indirect costs to revenue volume from Income from Operations. These resulting measures present our financial performance compared to the results delivered in the prior year period.
Previous wording
On a non-GAAP basis, EBITDA for the three months ended December 31, 2025 and 2024 was approximately $5.7 million and $9.9 million and Adjusted EBITDA for such periods was $6.5 million and $9.9 million, respectively. The year over year decrease in both measures was primarily due to the decrease in revenue volume driven by conversion of certain VA and HHS contracts to small business contractors.
Current wording
On a non-GAAP basis, EBITDA for the six months ended March 31, 2026 and 2025 was approximately $10.0 million and $19.3 million, and Adjusted EBITDA for such periods was $11.9 million and $19.3 million, respectively. On a non-GAAP basis, Adjusted Income from Operations for the six months ended March 31, 2026 and 2025 was approximately $3.3 million and $10.8 million, respectively. The year over year decrease in the foregoing measures was primarily due to the decrease in revenue volume driven by conversion of certain VA and HHS contracts to small business contractors.
Previous wording
These non-GAAP measures of performance are used by management to conduct and evaluate its business during its review of operating results for the periods presented. Management and the Company's Board utilize these non-GAAP measures to make decisions about the use of the Company's resources, analyze performance between periods, develop internal projections and measure management performance. We have prepared Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of ongoing operating performance due to their inherently unusual nature. We believe that these non-GAAP measures are useful to investors in evaluating the Company's ongoing operating and financial results and understanding how such results compare with the Company's historical performance.
Current wording
These non-GAAP measures of performance are used by management to conduct and evaluate its business during its review of operating results for the periods presented. Management and the Company's Board utilize these non-GAAP measures to make decisions about the use of the Company's resources, analyze performance between periods, develop internal projections, and measure management performance. We have prepared Adjusted Income from Operations and Adjusted EBITDA to eliminate the impact of cost scaling initiatives that we do not consider indicative of our ongoing operating performance due to their inherently unusual nature. We believe that these non-GAAP measures are useful to investors in evaluating the Company's ongoing operating and financial results and understanding how such results compare with the Company's historical performance.
Previous wording
These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. EBITDA and Adjusted EBITDA are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate each adjustment in our reconciliation to the nearest GAAP financial measures and (ii) use the aforementioned non-GAAP measures in addition to, and not as an alternative to, revenue, operating income, net income or diluted EPS, as measures of operating results, each as defined under GAAP. We have defined these non-GAAP measures as follows:
Current wording
These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. Adjusted Income from Operations, EBITDA, and Adjusted EBITDA are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate each adjustment in our reconciliation to the nearest GAAP financial measures and (ii) use these non-GAAP measures in addition to, and not as an alternative to, revenue, operating income, net income or diluted EPS, as measures of operating results, each as defined under GAAP. We have defined these non-GAAP measures as follows:
Previous wording
Below is a reconciliation of EBITDA and Adjusted EBITDA reported for the three months ended December 31, 2025 and 2024 to its most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in thousands):
Current wording
Below is a reconciliation of Adjusted Income from Operations, EBITDA, and Adjusted EBITDA reported for the three months ended March 31, 2026 and 2025 to its most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in thousands):
Previous wording
Cash was approximately $0.3 million and $0.1 million for the period ended December 31, 2025 and September 30, 2025, respectively.
Current wording
Cash was approximately $0.1 million and $0.1 million as of March 31, 2026 and September 30, 2025, respectively.
Previous wording
Available borrowings under our revolving credit facility was approximately $10.7 million and $23.6 million for the period ended December 31, 2025 and September 30, 2025, respectively. The decrease is primarily due the additional short-term revolving debt to fund prepayment of labor and payroll tax costs at December 31, 2025 due to banking holidays.
Current wording
Available borrowings under our revolving credit facility was approximately $9.7 million and $23.6 million for the periods ended March 31, 2026 and September 30, 2025, respectively. The decrease is primarily due to a lower outstanding receivables balance at March 31, 2026.
Previous wording
Cash used in investing activities totaled $0.0 million and $(0.6) million for the three months ended December 31, 2025 and 2024, respectively. The cash utilized was predominantly due to capital expenditures in the three months ended December 31, 2025 and 2024, respectively.
Current wording
Cash used in investing activities totaled $39.0 thousand and $1.0 thousand for the six months ended March 31, 2026 and 2025, respectively. The cash utilized was predominantly due to capital expenditures in the six months ended March 31, 2026 and 2025, respectively.
Previous wording
Cash provided by financing activities during the three months ended December 31, 2025 and 2024 were approximately $4.9 million and $12.2 million, respectively. The cash provided by financing activities was principally to satisfy short-term working capital needs for the three months ended December 31, 2025.
Current wording
Cash provided by (used in) financing activities during the six months ended March 31, 2026 and 2025 were approximately $1.0 million and $(3.1) million, respectively. The cash provided by financing activities was primarily driven by net borrowings on the revolving credit facility, partially offset by term debt prepayment.
Previous wording
As of December 31, 2025, our immediate sources of liquidity include cash of approximately $0.3 million, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $50.0 million, subject to certain conditions including eligible accounts receivable. As of this filing, we had unused borrowing capacity of $10.7 million, which is net of outstanding letters of credit. The Company's present operating liabilities are largely predictable and consist of vendor and payroll related obligations. We believe that our current investment and financing obligations are adequately covered by cash generated from profitable operations and that planned operating cash flow should be sufficient to support our operations for twelve months from the date of issuance of these consolidated financial statements.
Current wording
As of March 31, 2026, our immediate sources of liquidity include cash, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $50.0 million, subject to certain conditions including eligible accounts receivable. As of March 31, 2026, we had unused borrowing capacity of $9.7 million, which is net of outstanding letters of credit. The Company's present operating liabilities are largely predictable and consist of vendor and payroll related obligations. We believe that our current investment and financing obligations are adequately covered by cash generated from profitable operations and that planned operating cash flow should be sufficient to support our operations for twelve months from the date of issuance of these consolidated financial statements.
Previous wording
A summary of our credit facilities for the period ended December 31, 2025 is as follows (in thousands):
Current wording
A summary of our credit facilities for the period ended March 31, 2026 is as follows (in millions):
Previous wording
1 Secured Overnight Financing Rate ("SOFR") as of December 31, 2025 was 3.9%.
Current wording
1 Secured Overnight Financing Rate ("SOFR") as of March 31, 2026 was 3.8%.
Previous wording
(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million and a maturity date of December 8, 2027. The Company has accessed funds from the revolving credit facility during the quarter and has a balance outstanding at December 31, 2025 of$13.1 million.
Current wording
(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million and a maturity date of December 8, 2027. The Company has accessed funds from the revolving credit facility during the quarter and has a balance outstanding at March 31, 2026 of$10.7 million.
Previous wording
The qualitative assessment of goodwill at December 31, 2025 determined a triggering event occurred requiring that we conduct additional quantitative analyses. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management's assessment was that the market capitalization at the end of the 1st quarter was not indicative of the Company's fair value.
Current wording
The qualitative assessment of goodwill at March 31, 2026 determined a triggering event occurred requiring that we conduct additional quantitative analyses. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management's assessment was that the market capitalization at the end of the 2nd quarter was not indicative of the Company's fair value.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, services under Cybersecurity Maturity Model Certification ("CMMC") Level 2, and enterprise infrastructure and cloud governance focused on designing and implementing zero trust architecture.
Current report — wording carried from elsewhere
Revenue decreased $29.9 million for the three months ended March 31, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors across our customer base.
Current report — wording carried from elsewhere
The following table summarizes results of operations for the six months ended March 31, 2026 and 2025 (in thousands except for per share amounts, and percentage of revenue):
Current report — wording carried from elsewhere
Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $41.5 million for the six months ended March 31, 2026 and 2025. The decrease was primarily due to the decrease in revenue volume.
Current report — wording carried from elsewhere
General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $1.0 million for the six months ended March 31, 2026 over 2025. As a percentage of revenue, general and administrative costs increased to 11.9% from 9.1%, with the increase being primarily due to the change in revenue volume. During the quarter, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
Current report — wording carried from elsewhere
Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $1.5 million for six months ended March 31, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
and implementation process improvement and quality assurance programs and techniques. We are actively pursuing additional credentials that will support our customers' ever evolving missions.